2018 will be a good year for information technology investments, as businesses, government agencies and other organizations in the United States spend nearly 6% more than last year on technology products, services and staff to improve their overall performance, Forrester Research Inc. projects in a report released last month.
But the fastest growth in technology spending will come in expenditures on customer-facing software, hardware, services and staff tied to e-commerce, digital marketing and customer service. Spending in those areas—which Forrester groups together under “business technology” or BT— will grow by 11.4%, the research firm says in the report, “2018 US Tech Budget Outlook: Growth Will Accelerate to Almost 6%,” by Forrester technology analyst Andrew Bartels.
“In the race to win in a low-inflation environment, businesses are ramping their investments in BT that helps firms win, serve and retain customers,” Bartels writes. “With limited ability to raise prices, companies must grow revenues through better customer experience and engagement.”
While BT spending is growing fastest, it still represents less than half of overall technology spending, Forrester says. The report projects that U.S. businesses, government agencies and other groups will spend $1.58 trillion overall in 2018 technology products, services and staff, up 5.8% from $1.49 trillion in 2017. BT will account for a little more than a third of the total this year, or about $539 billion; the rest of the spending will go toward what Forrester defines as back-office technology, or BoT, including software and hardware systems used to manage financial, HR, inventory and warehouse operations. Forrester projects BoT spending will grow by 3.1% this year to close to $1 trillion.
The report projects that spending on new technology projects will make up about 29% of U.S. tech budgets this year, with new BT projects accounting for about 54% of them.
Forrester says heavy adoption of cloud technology will result in a 12% increase in what it calls “BT MOOSE” expenditures, which involves spending to maintain and operate tech organization and equipment. While most MOOSE spending is on back-office technology systems, “the rapidly rising share of tech MOOSE from BT systems will create headaches for chief information officers,” the report says.
In a related study released last month and authored by Bartels and other Forrester analysts—“The 2018 Outlook for US Industries and their Tech Budgets”—Forrester notes that spending on customer-facing business technology will account for 26% to 31% of technology budgets at manufacturers, financial services and professional services firms; 36% at wholesalers and other consumer products companies; 25% to 26% at government agencies, healthcare organization and educational institutions; and 45% to 39% at retailers and telecommunications companies.
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